EmailThe equity market registered only modest gains on Wednesday, yet it was a remarkable performance nonetheless. Remarkable in the sense that blue chip averages didn't lose ground despite IBM (IBM) declining close to 5.0% and Intel (INTC) dropping 2.5%.
The market fought its way through those disappointments and other earnings disappointments, seemingly heartened by strong housing starts data and a sharp drop in Spain's sovereign bond yield. Still, technical resistance above the 1460 level capped the upside momentum.
Today the cash market is indicated to open slightly lower. That is a bit surprising considering that some of the market's favorite trading catalysts are in play, namely reassuring economic data out of China and a successful debt auction in Spain.
Technical forces could be at work. We don't know. All we know at this juncture is that buyers and sellers are sticking close to the sidelines.
The news from China is that Q3 real GDP increased 7.4%. That marked the seventh straight quarter of deceleration and it was the slowest pace since the first quarter of 2009.
The reassuring aspect of China's GDP report was twofold: (1) it was in-line with expectations and (2) quarter-on-quarter growth accelerated to 2.2%, fueling a belief China's economy has bottomed. Separately, it was reported that fixed asset investment growth increased 20.5% year-on-year through the first nine months (vs. 20.2% Jan-Aug) and that industrial production and retail sales were up 9.2% and 14.2%, respectively, from a year ago.
China's data provided a lift to Asian markets, but Europe has not gone along for the ride.
Markets in Europe are mixed following a good run of late. On a related note, a two-day summit for EU leaders started today. That summit is not expected to produce any major stimulus surprises, as reports suggest it is geared toward discussing the pathway to a banking union and other options to achieve closer integration. Hmmm. It might behoove them to talk a little, too, about Spain, Greece, and a certain matter of a debt crisis.
Moving on, the latest batch of earnings results has been a mixed bag. There are some standouts like Travelers (TRV; beat by $0.68), some disappointments like Danaher (DHR; misses by $0.02), some ho-hums like Baxter (BAX; in-line), and some scratch-your-heads like Morgan Stanley (MS; beat with a lot of moving parts).
The latest initial claims report, meanwhile, isn't helping to break through resistance. Claims for the week ending October 13 (i.e. the week capturing the household survey for the monthly employment report) increased by 46,000 to 388,000.
Seasonal adjustment problems that positively influenced last week's report have been worked out, helping to explain the return of initial claims to their long-bounded range between 350,000 and 400,000. The four-week moving average ticked up slightly to 365,500.
The key takeaway is that labor conditions did not improve as much as thought last week.
Continuing claims for the week ending October 6 decreased by 29,000 to 3.252 mln (Briefing.com consensus 3.275 mln).
The S&P futures moved to their lows of the morning in the wake of the initial claims report. They are currently trading 0.2% below fair value.
